Progeon buy-out unlikely to hit Infosys earnings

The rumoured exit of Citigroup from Progeon and the subsequent integration of the BPO outfit with Infosys Technologies Ltd is unlikely to have any impact on the company's earnings or stock movement, analysts said.

While the rumourbeen doing the rounds since January, Infosys officials maintained these were speculative.

Sources said as per the agreement with Citigroup, the software major was supposed to take Progeon public by 2007-08. If not, Infosys was supposed to buy out the Citigroup stake, which would lead to the latter's exit by then.

But Citigroup's compulsion to exit Progeon at this point is not clear, unless the software major had given any indication that it would not take the BPO outfit public within the stipulated deadline, said an analyst.

However, all this has not impacted the Infosys stock, as the market sees no change in terms of the impact of integration on the company's earnings. "I see no impact on the revenues as everything would get consolidated," said an analyst. Infosys is governed by US GAAP, by virtue of its listing on Nasdaq. Therefore, the company's earnings are made on a consolidated basis.

With this likely buy-out, the payment of minority interests, among other things, will go away for Infosys, which is a good sign, analysts said adding this was not enough to trigger a re-rating of the stock.

"If at all the company buys out the Citigroup stake, it would be making good use of its cash pile to some extent," analysts said.

It would lead to greater control and provide more focus for the company on manageability, apart from reassuring its confirmation in the BPO business in the current market scenario.

Infosys may not take Progeon public and is likely to retain it as a wholly owned subdiary.

Unlike Wipro and MphasiS, which discontinued with their BPO brands, Spectramind and MsourcE respectively, Infosys is likely to retain the brand Progeon, analysts said.

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